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One of the few economists involved in the stock market whom I enjoy listening to is Peter Schiff. For those of you not familiar with his work, Peter is most known for accurately predicting the real estate and economic crash of 2008, which was outlined in his book Cash Proof: How to Profit from the Coming Economic Collapse.
Like me, Peter is very bearish on the U.S. stock market in general, which makes him rather unpopular in the mainstream media. CNBC will routinely have him on their network whenever the stock market is reaching new highs, but won’t mention his name when the Dow Jones drops 600 points in one day. It’s pretty comical as a viewer, and I am sure it is very frustrating for him.
BUT, whenever I see Peter Schiff on T.V. there is one question I want to ask him: for the average investor looking to retire, is gold a good investment? Unfortunately, because Peter is a strong proponent of sound money, he has developed an irrational obsession with gold. He is constantly talking about inflation and the Federal Reserve and believes that the only stable sanctuary from inflation is gold. Since the year 2000, he has made several calls for gold to reach $5,000 per ounce. Of course, through those years, the price is yet to break its all time high of $1,913.
If you were a doctor and your diagnoses were that off, most of your patients would be dead.
Not to mention, gold has 0% cash flow. There is no cash flow from buying a gold bar. How does that help you pay expenses, i.e. get closer towards financial freedom?
Also, over the last 35 years, the average rate of return of gold adjusted for inflation was 1.56%.
One. Point. Five. Six. Percent. Wahooo! – Where do you plan on living out your years of retirement? McDonalds? So, Mr. Schiff, I ask you again: how is Gold a good investment if it doesn’t help you achieve your financial freedom through cash flow or appreciate at a rate that will dramatically increase your net worth?
When you invest in gold, you aren’t doing anything to grow your portfolio; all you are doing is attempting to “protect capital”.
To view things from my financial perspective, if I receive a real estate opportunity and the cash flow isn’t above 8% from day one – net to investors, I throw it in the garbage immediately. Why? My goal is to vastly exceed the “hidden tax” through a strong Return On Investment.
Not only does gold not provide an adequate return from a cash flow basis, with real estate you can add value to your investment by rehabbing your properties and marketing to new tenants. This strategy can super-charge your returns into the double-digits. Not to mention the list of tax incentives you receive for owning property.
When it comes down to it, low-risk cash flow real estate makes a mockery of gold in all aspects of the investment.
My “hedge against inflation” is high-yield monthly cash flow that I can depend on for retirement.
It is as simple as that.